At a glance

Energy costs for businesses have risen by about 25% since February, and household bills are expected to increase further in January. This situation is forcing businesses to either raise prices or absorb costs, impacting profit margins and potentially affecting the broader economy. The rise in energy prices is attributed to factors like higher wholesale prices and global market pressures, and experts advise businesses to improve energy efficiency to mitigate these costs.

Business owners could be hit from both sides by rising energy prices, with commercial costs already up around 25% since February and household bills forecast to climb sharply again in January. Energy market analysts Cornwall Insight say the cost of a typical 12-month electricity contract for a small industrial and commercial site has risen by around 25% since February, with gas costs also increasing by a similar amount.

But the impact could spread much further than the energy bill itself. Latest Office for National Statistics figures show 25% of trading businesses are considering raising their own prices because of energy costs, while 61% expressed some degree of concern about energy prices in early August. Bank of England research also suggests businesses are being forced to choose between passing higher costs on to customers or absorbing them through lower profit margins.

At the same time, business owners are facing another increase at home. Ofgem has confirmed the household Energy Price Cap will increase from £1,663 to £1,723 from 1 October, while MoneySavingExpert is currently reporting an average forecast of £2,152 from January 2027. That would represent a further increase of around 24.9%, although the January price cap has not yet been confirmed.

Catherine Storer, Commercial Energy Assessor at Midlands-based Essential Site Skills, said the combination could create a wider knock-on effect across businesses and households. She said:

“For many business owners this is going to hit twice, through the cost of running their business and then again when their household bills land.

“But the impact doesn’t stop there.

“If a business cannot absorb higher energy costs, it may have to increase its prices. If it does absorb them, that can mean lower margins and less money available for investment, recruitment or growth.

“Then those same business owners and their customers are facing higher household bills as well, which means less disposable income and potentially less money being spent elsewhere in the economy.

“That is why energy price rises can have such a wide knock-on effect. What starts with the cost of gas and electricity can quickly feed through into the price of goods and services, business confidence and household spending.”

Cornwall Insight has linked the recent rise to higher wholesale prices, continued uncertainty in the Middle East, European gas storage levels and wider pressures on global energy markets.

Catherine added:

“Businesses cannot control global energy markets, but they can control how closely they monitor usage, how efficiently their premises operate and how early they prepare for contract renewals.

“The businesses that act now will be in a much stronger position than those that wait for another increase to land.

“Even small improvements in efficiency or energy use can matter more when prices are this high.

“The key is not to assume there is nothing you can do. Understanding where energy is being used, where it may be being wasted and what changes are realistic gives businesses something they can actually act on.”

Editorial insight

Rising energy costs are once again putting pressure on both commercial and household budgets, with latest figures pointing to a significant increase in business energy bills since the start of the year. The issue is not confined to one sector or region, as the combined effect of higher wholesale prices and ongoing global market uncertainty is being felt across the board. Business owners now face the prospect of increased costs not only at work but also at home, as household energy prices are set to climb further in the coming months.

The practical implications extend beyond immediate financial strain, with many businesses weighing up whether to pass these costs on to customers or absorb them at the expense of future investment. For smaller firms in particular, the dual impact of rising operating costs and higher living expenses could influence decisions on recruitment, pricing, and overall confidence. While energy price volatility is largely outside the control of individual companies, the focus on efficiency and proactive contract management is likely to intensify as businesses look to protect margins in an uncertain market.

This latest round of increases follows a period of relative stability in the UK energy market, but recent volatility in global wholesale prices and ongoing geopolitical uncertainty have renewed concerns about affordability and business resilience as the winter approaches.

Story ideas and journalist angles

Consumer impact

Household Energy Price Cap Increase and Its Effects

The increase in the household Energy Price Cap from £1,663 to £1,723 in October, with a further potential rise in January 2027, is set to affect household budgets significantly, influencing consumer spending and economic stability.

Target audience consumer-lifestyle, national-news Story potential 7/10 Economic impact

Impact of Rising Energy Costs on Small Businesses

With energy costs for small industrial and commercial sites increasing by 25% since February, businesses face tough choices between raising prices or absorbing costs through lower margins, affecting overall business growth and employment.

Target audience business-finance, regional-news Story potential 8/10